The CARES Act passed in March included relief for federal student loan borrowers in the form of canceled payments and no interest accrual through the end of September. President Trump has since signed an executive order extending these provisions through the end of this year. While there was some confusion among loan servicers and borrowers on the specifics of this order, the Department of Education and Federal Student Aid have sent out a press release on August 21st clarifying the order. You can find that press release here.
Some important takeaways for our federal student loan borrowers include:
- The interest rate on federal student loans will be 0% for the rest of this year.
- Payments on federal student loans are suspended, without penalty, until the end of this year. It will show up on your student loan statement as "forbearance".
- Non-payments for those individuals working toward public service loan forgiveness and who are otherwise qualified will count toward the 120-payment requirement for this forgiveness.
- If you are repaying your federal student loans under an income-driven repayment plan and your re-certification date falls between March and the end of this year, you do not have to recertify before December 31, 2020. If you received any letter indicating you missed your re-certification date, your interest has been capitalized (added to the principal balance), or your monthly payment has increased, please let us know and we can help you work with your loan servicer to correct that error.
While there is no downside for most borrowers to simply stop paying on their federal student loans until 2021, some borrowers who have the means might actually benefit from making payments during this time. If you haven’t spoken with Debbie or Courtney about your student loans since the CARES Act was passed in March, please reach out so we can be sure to discuss this at your Client Review Meeting this fall.
For those with private student loans, reach out to your loan servicer if you haven’t already and inquire about any payment relief they might be offering during this time. It never hurts to ask!